Today's Managing Health Care Costs Number is 3
Kaiser Family Foundation and the Health Research Educational Trust released their annual report on employer sponsored health insurance on Tuesday - and the headline is that employee out of pocket costs continue to increase out of proportion to medical inflation.
· Premiums for employer sponsored health plans increased by 4% - substantially more than workers’ income (+1.9%) and general inflation (-0.2%)
· The portion of firms offering health insurance hasn’t changed significantly from last year.
· Worker contribution to health care costs increased more than employer contribution, although employers continue to pick up the vast majority of health care costs.
· 63% of workers at small firms and 39% of all workers have single deductibles of $1000 or more;
· 13% have single deductiles of $6000 or more.
Hillary Clinton came up with a two-pronged plan in short order to address the issue of escalating out of pocket costs. The first addresses patients who individually have catastrophic out of pocket costs, and the second offers relieve to relatively healthier people who are never likely to reach their deductibles, but who hate to be paying first dollar for those first few non-preventive office visits.
Clinton proposes to offer a refundable tax credit (up to @$2500 for individuals and $5000 for families) to those who pay more than 5% of their income on out of pocket health care. She would fund this by increasing taxes on the rich and on pharmaceutical companies. As Jonathan Allen of Vox notes in an explainer, this would require Congressional action, which is unlikely even in the first term of a Hillary Clinton presidency barring an unexpected Democratic wave election. From a public policy perspective -this offers the same type of out of pocket protection that the Affordable Care Act already affords to those with silver level exchange plans and income under 400% of the federal poverty level. It's a good idea - and the benefit would predominately go to those with serious or chronic diseases.
Clinton also proposes that three non-preventive visits a year be covered in full before patients have hit their deductible. This will impact a much larger portion of the insured population – but it’s more troubling.
· This will be hard to administer. The cost of the office visit often pales compared to the cost of related diagnostic studies – and if the diagnostic studies are not included there will be many folks who are deeply disappointed.
· This will increase costs – Clinton’s campaign says $100 per person per year although it could be substantially more than that
· Health plans will have to strip out costs from the care of those with more substantial illnesses to stay within the actuarial value that they have promised
· There is a timing issue- this needs to be done at last 18 months in the future, to allow integration into the medical cost and therefore premium
· Employers facing the 40% excise tax will be especially vigilant about offsetting this new coverage (for pretty healthy people) by cuts in coverage (which will have to come from the coverage of those with higher medical claims).
· Front end deductibles do lead more reluctance to seek care, and should lower the utilization of low value care. Office visits have been going down in recent years, perhaps because of deductibles. Making the first three visits exempt from deductibles will diminish
Here’s a link to NYT review of health policy experts’ responses to this proposal.
Rising out of pocket costs are a real problem for Americans with modest incomes– and it’s great that there is more attention to this issue. The Clinton plan might be a starting point, although the plan to offer a government subsidy for high out of pocket costs relative to total income makes good policy sense but is politically dead in the water. The plan to add “free” sick visits is more likely to prevail in the political world, but it’s more problematic and could paradoxically lead to less rich coverage for those with serious illnesses, especially if the excise tax is not overturned.
